Many believe that “blockchain is the biggest innovation on the internet, since the internet itself” and the recent roller-coaster ride in cryptocurrency has attracted several. However, fintech in itself is a broad category and cryptocurrency is just part of it. The pandemic pushed the cashless payments space to grow leaps and bounds last year, and its benefits have attracted many to hold on to it, even after the virus crisis ends. While cryptocurrency or bitcoins still face a lot of uncertainties, fintech has many other products and services under its umbrella that investors can rely on for better returns.
Tap-and-Pay is the New Normal
The fintech umbrella includes payment processing, online and mobile banking, online and peer-to-peer lending, person-to-person payments, financial software and services. But its tap-and-pay services have been one of the most attractive segments. In fact, in the early days of the pandemic, a payments journal survey showed that 51% of U.S. shoppers started using mobile wallets and other tap-to-go credit card facilities. And 58% of people who did not use contactless cards were more likely to do so as the pandemic woes heightened.
Per a Precedence Research study published in a globenewswire.com article, the global contactless payment market size was valued at $1.05 trillion by transaction value in 2019 and is poised to see a CAGR of 20.01% to cross $4.60 trillion by 2027.
Fintech: More Than Just Payment Gateways
Apart from providing payment gateways or contactless payment services, fintech provides artificial intelligence (AI)-backed banking, lending and other financial services. Companies like Upstart offer online lending platforms that use AI to automate the lending process and provide enhanced security to prevent fraud. Additionally, technologies like robo-advisers that provide automated, algorithm or AI-driven financial planning services to offer advice and automatically invest client assets are constantly gaining importance. This is simplifying investing for new traders and offer easy account setup, robust goal planning, portfolio management, security, exclusive customer service, comprehensive education on portfolio, and most importantly lower fees than human advisors.
Big banks like Goldman Sachs are transforming their investment bank and wealth management services using their Marcus savings and personal loan platform to connect with customers who can avoid the hustles and time constraints experienced in the brick-and-mortar branches. These tech-focused approaches help in maximizing efficiency and consumer value.
IPOs Boost Fintech Space
Along with other positives, initial public offerings (IPO) and funding continue to boost the fintech space. On Jun 8, payment processing company Marqeta, Inc. began trading on the Nasdaq under the ticker symbol MQ. The company’s IPO price stood at $27 a share and it closed 13% higher at $30.52, the very next day, putting its market cap to just more than $16 billion. Marqeta pioneers a payment technology that is designed to detect potential fraud and ensure that money is properly routed. In fact, the pandemic-driven adoption of fintech has boosted this company, helping it issue more than 320 million cards to its customer to date.
Another company payments firm, Flywire Corporation, started trading on the Nasdaq under the ticker FLYW, and was priced at $24 per share in its IPO on May 23. The company has reported a 38% rise in revenues in the latest quarter, accredited by strong online purchases due to the COVID-19 pandemic and focuses on payments in the education, healthcare and travel sectors.
5 Stocks to Look At
The potential of fintech is quite attractive. It has been seen that despite the dramatic growth of cashless payments last year, there are still a huge amount of transactions made in cash globally. In fact, as people start adapting to online banking services, the fintech space will continue to boom. Hence, we have shortlisted five stocks to watch out for.
EVERTEC, Inc. EVTC engages in transaction processing business, enabling point of sales and e-commerce merchants to accept and process electronic methods of payment, such as debit, credit, prepaid, and electronic benefit transfer (EBT) cards.
This company that belongs to the Zacks Financial Transaction Services industry has an expected earnings growth rate of 50% for the current quarter. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 5.5% upward over the past 60 days. EVERTEC currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Equifax Inc. EFX provides information solutions and human resources business process outsourcing services, and engages in credit and financial information, and credit scoring and modeling. This company that belongs to the Zacks Financial Transaction Services industry has an expected earnings growth rate of 6.3% for the current quarter. The Zacks Consensus Estimate for this Zacks Rank #2 company’s current-year earnings has been revised 9.8% upward over the past 60 days.
PayPal Holdings, Inc. PYPL operates as a technology platform and digital payments company. The company's expected earnings growth rate for the current year is 22.2% compared with the Zacks Internet - Software industry’s projected earnings growth of 2.5%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 3.5% upward over the past 60 days. PayPal currently carries a Zacks Rank #3 (Hold).
Fiserv, Inc. FISV provides payment and financial services technology. This Zacks Rank #3 company's expected earnings growth rate for the current year is 23.1% compared with the Zacks Financial Transaction Services industry’s projected earnings growth of 21.1%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 0.4% upward over the past 60 days.
Square, Inc. SQ creates tools that enable sellers to accept card payments; also provide reporting and analytics, and next-day settlement. The company's expected earnings growth rate for the current year is 78.6% compared with the Zacks Internet - Software industry’s projected earnings growth of 2.5%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 31.6% upward over the past 60 days. Square currently carries a Zacks Rank #3.